Castelle Reports Strong Financial Results for First Quarter of Fiscal Year 2006.MORGAN Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. HILL, Calif. -- Castelle(R) (Nasdaq:CSTL CSTL Chemical Science and Technology Laboratory CSTL Clinical Study Team Leader ), a leader in "all-in-one (1) A combination computer printer, scanner, copy machine and fax machine. Some all-in-ones exclude the fax capability or make it an option. (2) A desktop computer that houses every component except the keyboard and mouse inside the same case as the monitor. " network fax solutions for business and enterprise markets, today reported financial results for the Company's first quarter ended March 31, 2006. Revenues and Earnings Continue Growth Trend Revenues for the first quarter of 2006 totaled $2.99 million, up 15% from $2.59 million in the first quarter of 2005. This represented the Company's highest quarterly revenues since the fourth quarter of 2000. The Company achieved net income of $206,000, or $0.05 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the first quarter of 2006, representing an increase of 53% from net income of $135,000, or $0.03 per fully diluted share, in the first quarter of 2005. The increase for the first quarter of 2006 was achieved despite being negatively impacted by non-cash share-based compensation expenses of $82,000, or $0.01 per fully diluted share, related to the adoption of fair value accounting for share-based compensation. No comparable expenses occurred in the first quarter of 2005. Net income in the first quarter of 2005 was negatively impacted by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $180,000, or $0.04 per fully diluted share, as a result of certain accounting and legal fees. "Our first quarter of 2006 was a clear reflection of Castelle's successful expansion into the enterprise market with FaxPress Premier(TM)," said Scott McDonald Scott Douglas McDonald (born 21 August 1983, Melbourne, Australia) is a professional football (soccer) player who currently plays in Scotland for Celtic as a striker. After a £400,000 bid from Rangers was rejected in January 2007,[1] , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Castelle. "FaxPress Premier has been a significant contributor in helping Castelle capture additional market share, and has been one of the key drivers behind our revenue and earnings growth. Also in the first quarter, Castelle introduced a more robust digital fax server, FaxPress Enterprise(TM), to support the increasing demand for installations in digital environments. FaxPress(TM), FaxPress Premier and FaxPress Enterprise have been well received by new and existing customers worldwide, and we look forward to expanding our share of the fax server market." Castelle Continues to Strengthen its Balance Sheet Castelle's balance sheet as of March 31, 2006 reported cash and cash equivalents of $7.14 million, up 5.6% from December December: see month. 31, 2005. This translates to nearly $1.59 per fully diluted share. Cash has not been at this level since the second quarter of 1997. Castelle remains free of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . Strategic Partnerships to Support New Growth Initiatives Castelle has recently taken several significant steps to expand its product offerings and establish new solution partnerships. In addition to the introduction of FaxPress Enterprise in March, Castelle announced that FaxPress Premier has been approved by Fujitsu (company) Fujitsu - A Japanese elecronics corporation. Fujitsu owns ICL, Amdahl Corporation, and DMR. Home USA, Japan. Limited as an "Interstage(R) Enabled" product in Japan. In April, Castelle announced the integration of its fax servers with Ricoh's new GlobalScan 2.0 software to provide a complete fax solution for all electronic and paper-based documents. Use of Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Operating Results The Company's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). results reflect the adoption of Statement of Financial Accounting Standard No. 123 (revised 2004) "Share Based Payment" ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R"). On a non-GAAP basis, net income, excluding share-based compensation expenses, was $288,000 for the first quarter of 2006, which was more than double the net income (GAAP and non-GAAP) of $135,000 in the first quarter of 2005. Prior to fiscal 2006, Castelle had not reported share-based compensation in the determination of its GAAP operating results. Castelle discloses non-GAAP financial measures of net income and net income per share and believes that this non-GAAP information provides historical comparability of its core operating results over multiple reporting periods. These non-GAAP financial measures should not be considered an alternative to earnings and earnings per share presented in conformity with U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . Further, these non-GAAP financial measures are unlikely to be comparable to non-GAAP information provided by other companies. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SEC regulations, reconciliation of the Castelle statements of earnings to the non-GAAP information is provided in the tables attached to this press release. If you would like to be added to Castelle's investor email list, please contact Karin Karin is a common feminine given name in various Germanic languages (geographically including Germany, Scandinavia, and Holland), Japanese, and in some French-speaking areas. Smith at ksmith@castelle.com. About Castelle Castelle (Nasdaq:CSTL), a market leader in "all-in-one" network fax solutions for business and enterprise, develops office automation systems that allow organizations to easily implement faxing over local area networks and the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Castelle's network fax servers, FaxPress(TM), FaxPress Premier(TM), and FaxPress Enterprise(TM) provide a simple way to integrate fax with email, desktop and back-end (programming) back-end - Any software performing either the final stage in a process, or a task not apparent to the user. A common usage is in a compiler. A compiler's back-end generates machine language and performs optimisations specific to the machine's architecture. applications. Castelle products are designed to be easy to use and maintain, and provide an economical way for companies to share resources over the network. Castelle was founded in 1987 and is headquartered in Morgan Hill, California Morgan Hill (IPA: /ˈmɔrgɨn ˈhɪl/) is a city located in the southern part of Santa Clara County, California, USA. . Its products are available through a worldwide network of distributors, resellers, and online retailers. Visit Castelle online at www.castelle.com. FaxPress(TM), FaxPress Premier(TM), and FaxPress Enterprise(TM) are trademarks of Castelle. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release may contain forward-looking statements, including but not limited to references to revenue growth and our ability to successfully expand our product offerings to penetrate new and current markets. These statements are subject to risks and uncertainties, including but not limited to the impact on our results from fluctuations in demand for our products, our ability to maintain and increase market share, the timely development, acceptance and pricing of our products, the impact on EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. from future non-cash tax provisions or benefits and general economic conditions as they affect our customers. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements as contained in our reports to the Securities and Exchange Commission, including our Forms 10-K and 10-Q. The Company assumes no obligation to update the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information.
CASTELLE
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31, 2006 March 31, 2005
-------------- ---------------
Revenues:
Products $ 2,187 $ 1,893
Services 802 701
-------------- ---------------
Total net revenues 2,989 2,594
Cost of revenues:
Products 791 542
Services 276 270
-------------- ---------------
Total cost of revenues 1,067 812
Gross profit 1,922 1,782
Operating expenses:
Research and development 485 439
Sales and marketing 674 598
General and administrative 616 635
-------------- ---------------
Total operating expenses 1,775 1,672
Operating income 147 110
Other income, net 59 25
-------------- ---------------
Income before income taxes 206 135
Provision for income taxes - -
-------------- ---------------
Net income $ 206 $ 135
============== ===============
Net income per common share:
Basic $ 0.05 $ 0.04
============== ===============
Diluted $ 0.05 $ 0.03
============== ===============
Shares used in per share calculation:
Basic 4,001 3,820
============== ===============
Diluted 4,485 4,465
============== ===============
CASTELLE
Pro Forma Condensed Consolidated Statements of Earnings
Excluding 123R Share Based Payment Expenses
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31, 2006 March 31, 2005
-------------- ---------------
Revenues:
Products $ 2,187 $ 1,893
Services 802 701
-------------- ---------------
Total net revenues 2,989 2,594
Cost of revenues:
Products 791 542
Services 266 270
-------------- ---------------
Total cost of revenues 1,057 812
Gross profit 1,932 1,782
Operating expenses:
Research and development 455 439
Sales and marketing 665 598
General and administrative 583 635
-------------- ---------------
Total operating expenses 1,703 1,672
Operating income 229 110
Other income, net 59 25
-------------- ---------------
Income before income taxes 288 135
Provision for income taxes - -
-------------- ---------------
Net income $ 288 $ 135
============== ===============
Net income per common share:
Basic $ 0.07 $ 0.04
============== ===============
Diluted $ 0.06 $ 0.03
============== ===============
Shares used in per share calculation:
Basic 4,001 3,820
============== ===============
Diluted 4,485 4,465
============== ===============
CASTELLE
GAAP to Pro Forma Reconciliation of Statements of Earnings
Excluding 123R Share Based Payment Expenses
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31, 2006
-------------------------------
GAAP Excluded Pro forma
--------- --------- -----------
Revenues
Products $ 2,187 $ - $ 2,187
Services 802 - 802
-------- --------- ----------
Total net revenues 2,989 - 2,989
Products 791 - 791
Services 276 (10) 266
-------- -------- ----------
Total cost of revenues 1,067 (10) 1,057
Gross profit 1,922 10 1,932
Research and development 485 (30) 455
Sales and marketing 674 (9) 665
General and administrative 616 (33) 583
-------- -------- ----------
Total operating expenses 1,775 (72) 1,703
Operating income 147 82 229
Other income, net 59 - 59
-------- --------- ----------
Income before income taxes 206 82 288
Provision for income taxes - - -
--------- --------- -----------
Net income $ 206 $ 82 $ 288
======== ======== ==========
Net income per common share:
Basic $ 0.05 $ 0.02 $ 0.07
======== ======== ==========
Diluted $ 0.05 $ 0.01 $ 0.06
======== ======== ==========
Shares used in per share calculation:
Basic 4,001 4,001
======== ==========
Diluted 4,485 4,485
======== ==========
CASTELLE
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
March 31, 2006 December 31, 2005
-------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 7,144 $ 6,766
Accounts receivable, net 913 1,137
Inventories 1,300 1,156
Prepaid and other current assets 231 135
Deferred taxes 212 212
------------- -----------------
Total current assets 9,800 9,406
Property and equipment, net 212 200
Other assets 135 140
Deferred taxes 928 928
------------- -----------------
Total assets $ 11,075 $ 10,674
============= =================
Liabilities and shareholders' equity
Current liabilities:
Current portion of long-term debt $ 10 $ 14
Accounts payable 320 286
Accrued liabilities 828 824
Deferred revenue 1,538 1,498
------------- -----------------
Total current liabilities 2,696 2,622
Long-term debt, net of current
portion - -
------------- -----------------
Total liabilities 2,696 2,622
Shareholders' equity 8,379 8,052
------------- -----------------
Total liabilities and
shareholders' equity $ 11,075 $ 10,674
============= =================
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